Delivering 762 commercial airplanes in 2015 – 39 more than in 2014 – Boeing set a company record. It also accumulated 768 net orders in the past year, valued at $112.4 billion at list prices. At year end, Boeing held 5,795 unfilled orders from customers worldwide, with the 737 series making up 4,392 of that total, even with deliveries of 495 of the single-aisle aircraft last year. The next largest group of unfulfilled orders are for 787 Dreamliners, at 779 units, followed by the 777 twin-aisle jets at 524 aircraft.
Among notable milestones for 2015: the largest single order ever from FedEx – for 49 767 freighters; an expanded Seattle delivery center, paving the way for increased 737 production; and the first 737 MAX rolling off the line.
The 777X reached firm configuration, allowing detailed design of parts, assemblies, and systems for the airplane to begin, and the 787-10 saw detailed design work completed. www.boeing.com
Airbus
A banner 2015 for Airbus commercial aircraft included delivering 635 airliners – a company record – which included 491 A320 family single-aisle aircraft, 103 A330 widebodies, 27 double-deck A380s, and 14 A350XWBs. Increased production in 2015 pushed deliveries up for the 13th year in a row, surpassing 2014’s year-end delivery record of 629 aircraft.
Airbus tallied 1,036 net orders from 53 customers in 2015: 897 single-aisle aircraft and 139 widebodies. At year-end, the order backlog had climbed to 6,787 aircraft valued just shy of $1 trillion ($996.3 billion) at list prices.
Other accomplishments for Airbus in 2015 included dual U.S. and E.U. certification of the A320neo five years after its launch, production at various sites of components and structures for the A350-1000, and machining of the first engine pylon and center wing-box components for the initial A330neo.
Another 2015 highlight was the opening of Airbus’ final assembly line in Mobile, Alabama, where the company expects to produce between 40 and 50 A320 family aircraft annually by 2018.
To ring in the new year, Airbus increased the average list prices of its aircraft by 1.1% across the product line, a modest increase that officials said reflects the drop in materials and commodities prices. www.airbus.com
Embraer
The regional jet manufacturer reported a good year in 2015 with 101 aircraft delivered to the commercial airline market and 120 to the executive aviation market (82 light and 38 large business jets). The combined 221 aircraft deliveries are the highest volume in the last five years. Firm order backlog stands at $22.5 billion.
The company plans to roll out the first of its second-generation E-Jet commercial aircraft in February, the E190-E2, with first flight in the second half of 2016.
Since the E-Jets E2 program was launched in June 2013, the three 70-to-130-seat aircraft E2 variants have achieved a backlog of 267 firm orders in addition to 373 options and purchase rights. www.embraer.com
Bombardier
After suffering $4.9 billion in charges related to its C Series regional jet program and from ending the Lear 85 business jet, Bombardier agreed to a Quebec government lifeline of up to $1 billion in exchange for a 49.5% equity share. On the upside, the first 100- to 150-seat C Series aircraft, the CS100, received Transport Canada flight certification. Bombardier has orders and commitments for 603 C Series aircraft, with firm orders for 243. www.bombardier.com
Looking forward
The global aerospace and defense (A&D) industry is expected to return to growth in 2016 with total sector revenues estimated to grow at 3.0%, according to the Deloitte Touche Tohmatsu Ltd. (Deloitte Global) Consumer & Industrial Products Industry group’s 2016 Global Aerospace and Defense Sector Outlook. This positive signal follows years of declining revenue growth of 3.2% in 2013, 1.9% growth in 2014, and -0.5% growth in 2015.
The commercial aerospace subsector should continue its decade-long trend of above-average growth rates, driven by growing passenger travel and an accelerated equipment replacement cycle.
“Strong increases year-over-year of global revenue passenger kilometers are leading to an unprecedented level of aircraft production rates, which in 2015 were about twice the levels experienced 10 years ago,” says Tom Captain, global leader for Deloitte’s A&D segment.
Growth in 2016 is expected to be fueled by increases in the U.S. defense budget, a resurgence of global security threats, and growth in defense budgets of key nations around the world. U.S. defense spending will likely increase $13 billion in FY2016, growing the subsector by an estimated 2.7% during the year, according to the report.
In 2016, an estimated 1,420 large commercial aircraft will be produced – 40.5% more than five years ago.
Potential headwinds
A strong U.S. economy, slower global growth, and expectations the U.S. Federal Reserve will raise interest rates have strengthened the value of the U.S. dollar 14% since July 2014, and many businesses anticipate further strengthening in 2016.
A stronger dollar pushes up prices of U.S. A&D products, making exports less competitively priced in the global market. But U.S. exports of sector products increased during the same period, a somewhat counterintuitive finding. A&D products continue to be the number one export for the U.S.
Another challenge faced by the aerospace supply chain is the ability to keep pace with OEM customers, which requires them to dramatically increase the production rate of components, systems, and services. Some aerospace suppliers have met these challenges by changing their business model. Examples include investing in non-recurring research and development (R&D) for new aircraft production programs, hiring design engineering staff to produce detailed part designs, investing in tooling for manufacturing, and directly managing a cadre of lower tier suppliers.
Other suppliers have struggled to meet challenges related to changes in pricing and volume expectations, parts shortages, defects, unplanned overtime, and investment requirements.
Customers – whether airlines or government defense procurement officials – continue to expect more for less: more functionality, less cost for maintenance, lower acquisition prices, and better, more competitive products. The global A&D sector is expected to continue to experience pricing pressure, and needs to be more efficient and reduce costs in 2016.
At the annual press conference, Airbus President and CEO Fabrice Brégier and Chief Operating Officer - Customers John Leahy (left) laid out goals for 2016, including delivering at least 50 A350s. (Airbus)
Global merger and acquisition (M&A) deal value in the A&D sector reached its highest level ever in 2015, recording deals worth $54.6 billion in 2015 by Nov. 25, compared to $14.1 billion in 2008 – a 288% increase. Similarly, deals increased 12.1% to 185 transactions in 2015 compared to 165 transactions in 2008.
Two landmark transactions occurred in 2015: Berkshire Hathaway’s $35.8 billion deal to acquire the remaining 96.9% interest in Precision Castparts Corp. (the largest deal in A&D history) and Lockheed Martin’s $9.0 billion acquisition of helicopter manufacturer Sikorsky from United Technologies.
The aerospace supply chain is likely to consolidate further, with some smaller companies unable to afford investing in the industry going forward. The trend to consolidate by part family – components, aero-structures, electronics, and interiors – may continue for a few years to gain economies of scale and to provide the required investment in people and tooling. Despite these challenges and production increases, Deloitte estimates commercial aerospace revenues will grow 3.4% in 2016. Defense contractors may consolidate to spur growth, offsetting declining revenues due to sluggish defense spending. www.deloitte.com/manufacturing
Jet engines
Robust market conditions led Pratt & Whitney to ramp up production of PurePower Geared Turbofan (GTF) for Airbus and Bombardier single-aisle jetliners entering service and Embraer, Mitsubishi, and Irkut regional jets in development. Some 300 of the GTFs are anticipated to be delivered in 2016 from an order and option book totaling more than 7,000 engines.
GE Aviation appears set to maintain engine production near 200 per year for large engine models (GE90-115, GEnx-1B) destined for widebody twin-jets. Add production from joint venture CFM International and the output should top 2,500 engines. Rolls-Royce also has orders to fulfill for widebody commercial airliners, turboprops, and turboshafts for military customers. www.rolls-royce.com, www.pw.utc.com, www.geaviation.com
Boeing celebrated final assembly of its first 737 MAX 8 at the end of 2015. The jet is the first member in Boeing’s new fuel-efficient MAX family of single-aisle airplanes to begin production. (Boeing)
UAS
The market for smart commercial unmanned aerial systems – with sensors and software to permit automated response to camera or other desired input – should reach $17.1 billion by 2021, according to Big Market Research. Agriculture, oil and gas, border patrol, law enforcement, disaster response, photography, videography, and package delivery are the expected market drivers. www.bigmarketresearch.com
About the author: Eric Brothers is senior editor for Aerospace Manufacturing and Design and may be reached at ebrothers@gie.net or 216.393.0228.
